De Beers Monopoly
Microeconomics
July 29, 2013
Research Paper on Monopoly
De Beers Monopoly
A monopoly is a market structure in which the number of sellers is so small that each seller is able to influence the total supply and the piece of the good or service. A monopoly can be both legal and illegal depending on the market structure. Monopolies and free enterprise companies will abuse consumers by monopolizing a specific sector of business. The question of a monopoly is if they don’t exist is it in all fairness in the industry? Who controls the monopoly? To stop a monopoly is to limit free enterprise of an individual. Monopolies will corner a market and can abuse consumers by pricing.
The De Beers Diamond Company is an example of a monopoly. De Beers is a company that dominates the diamond, diamond trading and diamond mining since the late1800’s. It is a miner and buyer of 70%-90% of the world’s rough diamonds up to the end of the 20th century. Cecil Rhodes, an English-born businessman, was the founder of the company. He broke into the diamond business in South Africa by renting water pumps to miners before buying diamond fields of his own. In 1880, he bought the claims of fellow entrepreneur and rival Barney to create the De Beers Mining Company. The trend in diamond mining is to combine with smaller groups to form larger ones. A particular person needing common infrastructure form digger committees and small claim holders wanting more land merge into large claimholders. It only took couple of years for the De Beers to become the owner of all South African diamond mines.
In 1888, De Beers Consolidated Mines was developed, causing a monopoly on all productions and distribution of diamonds coming out of South Africa. Cecil Rhodes continued to obtain diamond mines throughout southern Africa and used a lot of the profits to develop a political career. Around 1889, Rhodes was the head administrator of the British South Africa Company. As a result
July 29, 2013
Research Paper on Monopoly
De Beers Monopoly
A monopoly is a market structure in which the number of sellers is so small that each seller is able to influence the total supply and the piece of the good or service. A monopoly can be both legal and illegal depending on the market structure. Monopolies and free enterprise companies will abuse consumers by monopolizing a specific sector of business. The question of a monopoly is if they don’t exist is it in all fairness in the industry? Who controls the monopoly? To stop a monopoly is to limit free enterprise of an individual. Monopolies will corner a market and can abuse consumers by pricing.
The De Beers Diamond Company is an example of a monopoly. De Beers is a company that dominates the diamond, diamond trading and diamond mining since the late1800’s. It is a miner and buyer of 70%-90% of the world’s rough diamonds up to the end of the 20th century. Cecil Rhodes, an English-born businessman, was the founder of the company. He broke into the diamond business in South Africa by renting water pumps to miners before buying diamond fields of his own. In 1880, he bought the claims of fellow entrepreneur and rival Barney to create the De Beers Mining Company. The trend in diamond mining is to combine with smaller groups to form larger ones. A particular person needing common infrastructure form digger committees and small claim holders wanting more land merge into large claimholders. It only took couple of years for the De Beers to become the owner of all South African diamond mines.
In 1888, De Beers Consolidated Mines was developed, causing a monopoly on all productions and distribution of diamonds coming out of South Africa. Cecil Rhodes continued to obtain diamond mines throughout southern Africa and used a lot of the profits to develop a political career. Around 1889, Rhodes was the head administrator of the British South Africa Company. As a result
Cited: Goldschein, Eric. “The Incredible Story of How De Beers Created and Lost the Most Powerful Monopoly Ever”. Business Insider. Web. 19 December 2011. Johannesburg, Windhoek. “The Cartel isn’t Forever”. Economist. Web. 15 July 2004 Stein, Nicholas. “The De Beers Story”. Money.CNN. Web. 19 February 2011 Zimnisky, Paul. “Diamond: Driven by Market Forces for the First Time in 100 years”. Resource Investor. Web. 9 April 2013.